To say 2020 was difficult for everyone is an understatement. One bright spot though for farmers was the massive global commodity buying spree at the end of the year. This unexpected increase in exports – particularly of corn and soybeans -- pushed demand for U.S. commodities way up, bringing ending stocks for both commodities down and boosting prices; and there’s no signal that we’ve reached the top, yet. As the 2020/21 marketing year moves past the halfway point, attention will shift to supplying the new 2021/22 crop, but for both years, exports are front and center.
Corn Supply and Demand
As the 2020/21 marketing year has progressed, corn production was not near the record levels first projected in February 2020, when USDA estimated 97 million acres of corn, decreasing what was anticipated to be record corn supplies. Corn planting for 2020 actually sat around 91 million acres, with production just above 14.5 billion bushels, not the near-16-billion bushels first estimated. What was unexpected was the increase in exports, the only corn use category estimate to increase throughout the growing season. In May 2020, when initial demand expectations were published, USDA estimated exports for the 2020/21 crop to be 2.15 billion bushels. In USDA’s latest (April 9) World Agricultural Supply and Demand Estimates, the department increased the estimate for corn exports to 2.67 billion bushels, a 24% jump. At the same time, ending stock estimates have decreased from 3.3 billion bushels in May 2020 to 1.3 billion bushels in April 2021, a 59% drop. All this has pushed USDA to bump its estimate for corn prices from $3.20 per bushel to $4.30 per bushel in just under a year. That is a 34% increase. Figure 1 is a chart of the progression of corn ending stocks and price during the 2020/21 reporting year, thus far.
Soybean Supply and Demand
The April WASDE indicated soybean planted acres for the 2020/21 marketing year at 83.1 million acres, close to the 83.5 million acres first estimated in February 2020. Yields ended up being better than expected, with 50.2 bushels per acre the current estimate, an increase of 1% from 49.8 bushels per acre estimated in February 2020. This helped boost soybean production higher than first estimated, with the April WASDE indicating soybean farmers produced 4.135 billion bushels, up from 4.125 billion bushels. Though supply ended up better than expected, the 11% increase in export estimates from May 2020 to April 2021 caught most people by surprise. In fact, all three use categories had increased estimates, indicating more soybeans were used domestically and for exports than originally anticipated in the 2020/21 marketing year. Total use increased 6% from May 2020 to April 2021. The impact to ending stocks was a decrease of 70%, moving from 405 million bushels first estimated in May 2020 to the 120 million bushels estimated in the April 9 WASDE. The price of soybeans has increased 37% as a result, moving from $8.20 per bushel to $11.25 per bushel. Figure 2 is a chart of the progression of soybean ending stocks and price during the 2020/21 reporting year, thus far.
Pace of Corn and Soybean Exports
The significant increase in corn and soybean exports is amplified in the Foreign Agriculture Service’s Weekly Export Sales reports. The total weekly exports for 2020/21 corn were double or more the total weekly exports of 2019/20 corn in 14 weeks of the 33 weeks thus far, with a 15th week pacing at 200% more exports of the 2020/21 crop than the 2019/20 crop year. Total corn exports for the 2020/21 marketing year at week 33, which is as of April 15, 2021, are just 9% behind total exports of corn during the entire 2019/20 marketing year, with 10 weeks to go in exporting the current marketing year corn crop. Figure 3 displays the pace of corn exports for the 2020/21 marketing year compared to the 2019/20 marketing year.
Soybean total weekly exports at week 33 for the 2020/21 marketing year have already exceeded the total amount of soybean exports for the entire 2019/20 marketing year by 24%. In eight of the 33 weeks thus far in the 2020/21 marketing year, the U.S. exported twice as much of the 2020/21 crop as was exported the same week for the 2019/20 crop and, during the ninth week, the U.S. exported 250% more soybeans in the 2020/21 marketing year than during the same week of the 2019/20 marketing year. Figure 4 shows the pace of soybean exports for the 2020/21 marketing year compared to the 2019/20 marketing year.
Takeaways
Export demand is largely driving the recent corn and soybean price surge, with the pace of U.S. corn and soybean exports in the 2020/21 marketing exceeding exports in 2019/20. Export destinations include China, which is looking for low-cost animal feed to rebuild and feed their hog herd, while U.S. competitors like Brazil and Argentina are on track to supply fewer corn and soybeans than expected, pushing their prices up as well. These factors and others are making U.S. commodities more attractive, but how long will buyers tolerate these higher prices before seeking alternatives? All that being said, the market focus will shift to monitoring the new 2021/22 crop supplies. Planting season has just begun across the U.S., with conditions already less than ideal as many parts of the U.S. are experiencing drought conditions. These factors and others may be reflected in the next update to supply and demand for the 2020/21 crop and the first look at demand for the 2021/22 new crop, which will be released on May 12.
